The Problem

TL;DR: Web3 lacks an easy and efficient way to launch new blockchains, leading to too few security providers (Ethereum, Solana), resulting in scalability bottlenecks, which force compromised solutions like layered architecture (L2s, rollups).

The current landscape of Web3 faces considerable challenges when it comes to launching new blockchains. These limitations have resulted in a scarcity of security providers, primarily concentrated around a few main platforms like Ethereum and Solana. This page explores the implications of this issue and how it affects the scalability of blockchain networks. Additionally, we will discuss the consequential shift towards alternative architectures, such as layered solutions.

Developing and launching new blockchains is inherently complex. The process demands a robust security infrastructure capable of withstanding the challenges posed by malicious actors and network challenges. However, the lack of streamlined methods for rolling out new blockchain platforms has resulted in diminished security and limited provider options.

Security providers play a crucial role in maintaining the integrity and functionality of blockchain networks. The scarcity of providers hinders the ability of new blockchains to operate independently and securely. This deficiency is predominantly evident in established platforms like Ethereum and Solana, which dominate the space and control the majority of security resources.

The dominance of a few security providers creates significant scalability bottlenecks, impeding the ability of applications to grow and operate efficiently. As the demand for blockchain applications increases, the saturation of existing platforms limits the network's processing capabilities, causing delays and higher transaction costs.

In response to these challenges, developers have often turned to compromised solutions, such as layered architectures. Techniques like Layer 2 networks and rollups have been adopted to alleviate some of the strain faced by the main blockchain. These methods allow for improved transaction throughput, yet they often compromise the core tenets of decentralization and security inherent in the original blockchain design.

For Web3 to achieve its full potential, a paradigm shift in how blockchains are launched and scaled is crucial. Innovative methods to enhance the availability and diversity of security providers are essential in overcoming scalability issues. By addressing these challenges, the future of blockchain technology can be more vibrant, decentralized, and capable of supporting an extensive array of applications and use cases.

Current Choices

Today, the industry has hierarchical layers that are bottlenecked by a few Security Roots. The success of apps and layers is a scaling problem because apps are internal resource sinks to host protocols. Hosts siphon value from ecosystem-locked apps that are forced into lifelong centralized solutions. Current options for the builder are rigid and constraining, forcing a choice between two bad paths:

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Option 1: Dependent Application

L2s/dApps/Rollups ( Dependent Apps): are technologies built on top of a host protocol like an L1. These technologies are often marketed as decentralized, though they are not sovereign and often have centralized components.

Smart Contracts	Pros	Cons
Economic	The Host protocol handles capital lockup and security	Host protocol siphons value through ongoing payments
Technical	Host protocol handles Consensus, P2P, and Persistence layers	Scalability is dependent on the host; may be censored by non-stakeholders
Operational	Inherit the host's Validators	No control over the operation of the host protocol
Ecosystem	Instantly a part of the host's community	Difficult to access ecosystems outside of host
Governance	May have existing tools	Dependent on the host protocol
Sovereignty	None.	Trapped in host - escape requires a rebuild

DApps are easy to build, but monolithic chains struggle with scaling, centralize security, rely on speculation for diversification, and restrict dApps. The reality is that:

• Smart contract-based dApps initially lower technical, economic, and operational barriers.

• Achieving independence is costly, as it often requires a complete rebuild.

• dApps may become permanently trapped, limiting their value capture, growth, and autonomy.

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Option 2: Interoperable L1

A Layer 1 ( L1) is an industry term used to describe the traditional blockchain, like Bitcoin or Ethereum. Similarly, Layer 0 ( L0 ) is an industry term used to describe an L1 that hosts applications.

Even though there are significant advantages to L1-based app chains, the cold start problem is a significant challenge for L1s. To avoid takeover, they need a high Total Locked Value (TLV), a diverse set of validator operators to ensure decentralization, and strong interconnection to prevent isolation. Beyond that, L1 technology is complex, making it difficult to build and maintain.

Traditional Layer 1s	Pros	Cons
Economic	Maximum value capture for the application.	Requires significant capital to be locked up to secure the network to avoid hostile takeovers
Technical	Historically the best scalability	Requires a deep understanding of Consensus, P2P, and Persistence layers to avoid execution failures
Operational	Can curate it's own uniquely aligned set of validators	Requires diverse, experienced Validators to avoid centralization
Ecosystem	Can foster it's own ecosystem	Requires interoperability features to avoid isolation
Governance	Self-governing
Sovereignty	Fully sovereign from the start	Can experience progressive decentralization to minimize risks

No solution bridges the lifecycle gap in this reality, preventing the technology from being widely adopted by builders.

Read more about our view of the world in the Canopy Manifesto

Want to get technical right away? Check out the How Does Canopy Work? section.